El Paso City Council approves $12.8 million in incentives for new $120-million hospital

A $120 million teaching hospital will soon break ground on the city's West Side after the City Council on Tuesday awarded Tenet Hospitals Limited a $12.8 million incentive package.

"Every project is different, and being that it's a huge project with a $120 million investment, and believing that it's the start of more development and growth, it was a good investment," Mayor Oscar Leeser said.

Tenet, which owns and manages the Sierra Providence Health Network, will run the 108-bed, full-service hospital that will eventually expand to 140 beds. The hospital is expected to break ground in the coming months and open in fall 2016 at Transmountain Road and Resler Drive. That's in the Cimarron Community being developed by Hunt Communities.

REPORTER

Cindy Ramirez

Medistar Corp., a real estate developer that specializes in medical facilities, will develop the hospital and its adjacent medical building.

It will serve as a teaching hospital for medical and nursing students as well as resident physicians and faculty from the Texas Tech University Health Sciences Center at El Paso's Paul L. Foster School of Medicine.

The project is estimated to have a direct economic impact of more than $87.5 million in construction alone, and more than $30 million in direct employment impact, city officials said.

Under the agreement, Tenet is to spend at least $120 million to build the facility, including $105 million for the hospital itself. The remaining $15 million would be for a medical office building.

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The hospital chain will be required to create and maintain at least 300 full-time jobs that pay an average $45,000 a year during the agreement's 15-year term. Additionally, it would be required to retain all of its 2,991 existing full-time positions at its three other hospitals.

The agreement first called for the hospital network to retain only 80 percent of its existing full-time positions — in essence allowing it to shift up to 300 employees to meet the new jobs requirement. But that was later amended to ensure no existing jobs were lost, Leeser said.

New West hospital location. (Courtesy photo)

If the hospital does not meet the employment requirements, its incentives could be reduced or eliminated.

"As a company, we are investing in El Paso in a big way," said Eric Evans, CEO of the Sierra Providence Health Network's hospitals in El Paso. "We are growing with the community and providing services where they're needed."

The city will award as much as $12.8 million in tax breaks, grants and other incentives through what's called a Chapter 380 Economic Development Program Agreement.

That includes waiving an estimated $100,000 in permits and fees, and paying $300,000 a year for five years from its economic development impact fund.

The property tax rebate means Tenet would only pay 65 percent of its appraised value during the 15-year agreement. It's required to have a minimum base value of about $674,000 — the value of the land as it is now.

The value of the developed site would be assessed by the El Paso Central Appraisal District. The appraisal district's board of directors recently asked its directors to trim its legal budget, arguing that it often went unused. Appraisal district officials in turn had argued it should be increased, not cut, in order to fight lawsuits by multimillion-dollar businesses that challenge their appraised values.

"We are a huge taxpayer in El Paso and are proud to be so," Evans said. "While we expect our valuations to be fair, we are investing in the community and will continue to do so with our investments into facilities and with our property taxes."

Leeser said he doesn't believe the hospital would have been built as proposed without the incentives.

"Without being able to incentivize some of these companies, we would not have the opportunity to bring them to El Paso," Leeser said.

Tenet last year acquired Vanguard Health Systems Inc, an investor-owned hospital company, and has been expanding in Texas and across the nation. That meant other communities were competing for new or expanded hospitals, Evans said.

"With the opportunity we had to provide services to a growing region and establish it as a teaching hospital for Texas Tech, we had to come to the city and do this as a public-private partnership," Evans said.

Dr. Derrick Cox, a surgical oncologist with the Sierra Providence network, said he moved to El Paso in September because the city showed "palpable momentum to make this a viable place" to live, and the new West Side hospital was proof of that.

Dr. Jose Manuel de la Rosa, founding dean of the Paul L. Foster School of Medicine, said Texas Tech was approached by Medistar a few years ago to collaborate on the West Side hospital project.

That came at a time when the medical school was expanding its class sizes and looking to work with a private hospital. The medical school last year admitted a new class of 100 students — the largest since the school opened with a class of 40 in 2009. That increase required more clinical opportunities, De la Rosa said.

De la Rosa, who also serves as vice president for health affairs for the Texas Tech center in El Paso, said a national search for a hospital chain to run the new facility was conducted.

De la Rosa said third- and fourth-year medical students would begin rotations at the new hospital as soon as it opens. University Medical Center now serves as a teaching hospital, but De la Rosa said most medical schools join with private and public hospitals to provide the best experiences for its students.

"We are in no way diminishing our partnership with UMC," he said. "We're building on it and expanding."